Business Management Notes

Nature of Management

• Management: working with others to achieve business goals in a changing environment.
• Requires managing:
  • Human resources: people who work in the business.
  • Financial resources: money and assets.
  • Physical resources: tangible assets.

Skills of an Effective Manager

• Interpersonal (people) skills: ability to build positive relationships with staff.
• Communication skills: sending clear messages (verbal or nonverbal).
• Strategic thinking: planning for the business's future direction.
• Vision skills: A Vision Statements is a broad statement that announces what the business aspires to become, its purpose, and its function
• Problem-solving and decision-making skills using a systematic approach:
  1. Identify the problem \& causes.
  2. Gather relevant information.
  3. Develop alternative solutions
  4. Analyse the alternatives
  5. Choose one and implement it
  6. Evaluate the solution
• Flexibility and adaptability to change.
• Reconciling conflicting interests of stakeholders.

Achieving Business Goals

• Goal: a desired outcome (target).
  • Strategic goals: long term.
  • Tactical goals: short term.
  • S.M.A.R.T goals.
    • Specific: clear and easy to understand.
    • Measurable: quantifiable success.
    • Attainable: realistic and can be reached.
    • Relevant: a real benefit for the business.
    • Time-based: includes a realistic time frame.
• Financial objectives (PLEGS):
  • Profitability: money left after expenses.
  • Liquidity: ability to pay short-term debts.
  • Efficiency: minimizing costs for maximum profit.
  • Growth: size compared to competitors.
  • Solvency: ability to pay all debts.
• Types of Business Goals:
  • Profits
  • Market share
  • Growth
  • Share price
  • Social
  • Environmental

Staff Involvement

• Staff involvement: involving employees in decision-making and providing necessary skills and rewards.
• Initiatives:
  • Innovation: applying new ideas to improve existing products.
  • Motivation: internal processes that direct, energize, and sustain behavior through recognition, good communication, benefits, and work-life balance.
  • Mentoring: tutoring, coaching, and modeling behavior.
  • Training: teaching staff to perform jobs effectively.

Management Approaches

• Classical Approach: authoritarian/bureaucratic approach, dictating tasks.

  • Planning: setting goals \& methods
  • Organising: Arranging the resources of the business to achieve the goals
  • Controlling: Evaluating and modifying tasks to ensure that set goals are being achieved

• Behavioral Approach: participative/democratic approach, consulting with employees.

• Contingency Approach: flexible management to suit changing circumstances.

Key Business Functions (FORM)

• Finance
• Operations
• Human Resources
• Marketing

Operations

• Operations: transforming inputs into outputs (goods or services).
  • Inputs: resources (material, facilities, labor, etc.).
  • Transformation: process of converting inputs into finished products.
  • Outputs: end result (goods/services).

Managing Quality in Operations

• Quality Control (QC): reactive, based on inspection to remove defects.
• Quality Assurance (QA): proactive, ensuring processes meet requirements.
• Quality Improvement (QI): continuous improvement and Total Quality Management (TQM).

Marketing

• Marketing: planning, pricing, promoting, and distributing products to meet customer needs.
• The 4 Ps of Marketing:
  • Product: good or service (quality, design, name, packaging, features, branding).
  • Place: channels of distribution (producer to customer, retailer, or wholesaler).
  • Price: strategies like penetration pricing, price skimming, competitor's price, discount price, psychological pricing
  • Promotion: communicating with buyers to influence them.
• Target Markets:
  • Mass-market: large range of customers.
  • Market segmentation: dividing the market into similar consumer groups (geographic, demographic, psychographic, behavioral).
  • Niche market: narrowly selected target market segment.

Finance

• Accounting: recording financial transactions.

• Financial Statements:

  1. Income Statement: summary of income and expenses.
  2. Cash flow statement: movement of receipts and payments.
  3. Balance Sheet: assets, liabilities, and owner's equity.

• Revenue Statement:

  • Sales - COGS = Gross Profit - Expenses = Net Profit

• COGS = Opening stock + Purchases – Closing stock
  *Financial Ratios relevant to Profit

  1. Gross Profit Ratio = \frac{Gross Profit}{Sales} \times 100
  2. Net Profit Ratio = \frac{Net Profit}{Sales} \times 100
  3. Return on Equity Ratio = \frac{Net Profit}{Owner’s Equity} \times 100

• Key terms in Balance sheet include:

  • Assets: What we own
  • Liabilities:What we owe
    { Assets - Liabilities = Owner’s Equity}

• Cashflow statment indicates the movement of receipts and payments resulting from transactions over a period of time